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E-books – will VAT on them soon be reduced?

European publishers and booksellers have welcomed the decision of the European Commission (EC) to allow VAT to be reduced on e-books, with sales now bound to go up, according to booksellers.

Brussels yesterday (1st December) released proposals for new tax rules, including delivering on its pledge “to enable Member States to apply the same VAT rate to e-publications such as e-books and online newspapers as for their printed equivalents, removing provisions that excluded e-publications from the favourable tax treatment allowed for traditional printed publications”.

The EC first committed to reducing VAT rates on e-books earlier this year. In an Action Plan published in April, part of its digital single market strategy, it said it sought to address “the unequal treatment of paper versus e-publications for VAT purposes”. At the time, Stephen Lotinga told The Bookseller he welcomed the prospect of “greater flexibility”, saying “the tax system should not act as a disincentive to reading and learning”.

Previously e-books have not been eligible for a reduced VAT rates – which printed publications such as books and newspapers enjoy – because they are classified as an “electronic service”. In the UK, for example, e-books attract a 20% VAT charge, where print books have a zero-rate of VAT, which has long been seen as unfair by the book trade.

Once agreed by all member states, the new set-up will “allow – but not oblige” member states to align the rates on e-publications to those on printed publications. Subject to agreement, this could enter into force mid- to late- 2017.

A spokesperson for the Treasury said that the department would “carefully consider” the proposals, although the decision will require unanimity between all member states to be imposed, The Bookseller undestands.

Stephen Lotinga, c.e.o of the Publishers Association, said the trade body would now be speaking with the government about lowering VAT on e-books in light of the EC ruling, now that the UK is leaving the EU.

“The UK tax system has long recognised that VAT should not be a disincentive to reading, education and learning,” he said. “We’re pleased that the European Commission has today recognised that nation states should have the freedom to apply this principle regardless of format. We will of course be speaking to the UK government about trying to ensure that VAT is not applied to any type of book both now and after we exit the EU.”

The measures are “destined to boost the e-book market and to further stimulate reading”, according to Jean-Luc Treutenaere, co-president of the European and International Booksellers Federation (EIBF). He said: “We are very happy about those decisions and now look forward to a swift adoption of the proposal by the council, since a measure destined to boost the e-book market and to further stimulate reading should be met with the utmost favour. The commission’s e-commerce VAT-related decisions will definitely make sales of e-books easier for booksellers.”

Federation of European Publishers (FEP) president Henrique Mota meanwhile called it “a great day for our organisations” and “a fundamental step forward”.

“The commission’s proposal rewards our years of advocacy for the recognition that all books deserve the possibility to be applied reduced rates of VAT, independently from their format,” he said. “We are grateful to the commission for this fundamental step forward, and also to the European Parliament for its constant support, as well as to all the other associations that contributed to this result.”

From The Bookseller
Published December 1, 2016 by Katherine Cowdrey and Lisa Campbell